A World Of Free Movement Would Be $78 Trillion Richer

[Queequeg]

I doubt you could find many historians today who agree with you.

Seriously, I'm not trying to ruffle your feathers, but you're about 30 years behind current mainstream thoughts on the processes involved in the Industrial Revolution. Again....every place on Earth had approximately the same technology at the same time, and China was much further along on some of the key technologies. The tech was necessary to the industrial revolution, but it wasn't the cause otherwise it would have started in Hangzhou in 1200. The cause was a massive unemployed work force in London ready to utilize said technology.

I don't want to debate you, I'd rather you read for yourself and find out. Go to the wikipedia page on "industrial revolution" and read up on the causes, and the enclosure movement. Start there. It's all listed front and center. You can use it as a jumping off point to learn more about enclosure, London of the 19th century, and I guess economics in general.

Like you suggested I did read Wikipedia and wasn't too surprised at what I found.

Industrial Revolution - Wikipedia

The Industrial Revolution was the transition to new manufacturing processes in the period from about 1760 to sometime between 1820 and 1840. This transition included going from hand production methods to machines, new chemical manufacturing and iron production processes, improved efficiency of water power, the increasing use of steam power, the development of machine tools and the rise of the factory system. Textiles were the dominant industry of the Industrial Revolution in terms of employment, value of output and capital invested; the textile industry was also the first to use modern production methods.[1]

The Industrial Revolution began in Great Britain and most of the important technological innovations were British. Legal protections helped, such as courts protecting property rights. An entrepreneurial spirit and consumer revolution helped drive industrialisation in Britain which after 1800 was emulated in Belgium, the United States, and France.[2]

As you can see, the main reason the Industrial Revolution took off in Great Britain is because most of the key technological advances were invented by the British. The industriousness of a free people did the rest. The world was covered with cities of unwashed masses of potential workers but only countries that could exploit the new technologies experienced the Industrial Revolution. Chinese technology was very different than the practical inventions created in England. Moreover the Emperor had no interest in letting his people modernize.

I am not sure why people think that a sudden influx of uneducated farm workers and peasants would by itself cause anything to change for the better. Europe is undergoing that exact experiment now and so far it doesnt look like it's working out that well.​

 

[Queequeg]

What's with the lolling at the Mises Institute? Genuine question as I am interested in beginning to examine some of their work.

Libertarianism is fine but the Mises Institute tends to take it to such extremes that their conclusions often lose touch with reality. I think it is their rejection of standard econometric analyses and modeling that allows them to freely come up with their ideas without the reality check that comes from empirical testing. Spend too much time on their website and you too can turn into an Anarcho-Capitalist ideologue, promoting the abolition of the State, open borders and the physical removal of any who disagree.​

 

[bdawg]

What do you think stock/bond/property prices are if not the result of hyperinflation? Inflation is an increase in the money supply by the way, and increased prices are the result not the definition of inflation. Because the manner in which liquidity has been injected into the system, stock, bond, and high-end real estate prices (amongst other things that bankers and hedge fund managers invest in) have absorbed the liquidity and reflect it in sky-high valuations that have nothing to do with earnings or the future ability of the borrowers (for most sovereign, municipal, and corporate bonds) to pay them back. The hyperinflation produced by QE has chased these assets into the stratosphere.

Now, if that liquidity had instead been injected into the economy through, say, food stamps, you would have seen a huge increase in the prices of food that is covered by the food stamp programs.

Does that make sense?

P.S. - that is not to say that some Austrian and fellow traveler economists didn't make predictions about the CPI that didn't come true, only that they themselves didn't understand the extent to which the liquidity was corralled in the investment class and wasn't leaking out very quickly into the general economy. Also, the CPI and other such measurements are routinely tweaked, and when they are the result is a lower number. If the CPI was calculated with the same method that was used in the 1970s, the inflation number would be high single or low double digits during the QE period. Shadowstats and Zerohedge have information on this if you're interested.

Well said, inflation figures adjusted for asset values would be different, however debt servicability is much higher now then it used to be due to low interest rates so does this counteract the increase in asset value unaffordability.

Yes it favours the incumbents but the overall boost to economic activity is contrary to what inflation would have you believe.. maybe inflation is good?

The housing industry in Australia/Canada has been one of the biggest generators of wealth for middle class consumers in perhaps the world over the last 20 years, and debt is now much cheaper than it used to be in the 70s and 80s meaning more of that wealth is pocketed, this has the downstream effect of increasing consumer sentiment and supporting economic activity further

What's your take on that

 

[bdawg]

I agree with this.

I basically think they will fleece everybody and create an artificial "us" and "them" in order to distract from what is really going on. They will do this with open borders, or not. And the only way to stop it is to take it head on. Changes in economic policy, labor policy, immigration policy etc, will not magically enable or disable it.

Not suggesting you are saying otherwise, just expanding the thought . . .

Yup, for example tax cuts for the top 1% will happen either way, under closed borders or open

 

[bdawg]

That's up to them to decide, as I've never been an oligarch. However, I do think they profit off of it immensely, both financially and socially. The finance part is obvious, the social part will be xenophobic backlash and increase in crime due to unemployment.

The xenophobia primes the base population for right-wing policies, which are a way for elites to give the commoners "something for nothing". In other words, you don't have to actually improve society, you just have to convince the masses you'll lessen the presence of the foreign invaders.

The increased crime creates free prison labor.

They can just hire some fall-guys to institute the unpopular open border policies in the first place, and all is well.

Great summary, I was reading a piece on how the rich whites in the USA, especially in the early history of the country, created an underclass of whites in the blue collar and police industries who take ***t standards of living in exchange of affirmation of their group as higher than the blacks. In exchange for this no cost sense of social identity, the rich whites got protection at the expense of army and police lives, loyalty and political support for policies that enrich them at the expense of the poor whites. Mitt Romney and the tea party politicians were perhaps the most obvious examples of politicians representing this class

 

[bdawg]

Actually I was an anyone but Hillary voter but Trump was not my first second or third choice.

There are lots of examples where local industries fail so one example doesn't really mean that much. Look at our own billion dollar boondoggle Obama wasted on solar panel companies. However a country needs to produce something of value if it wants to improve its citizen's quality of life. A service economy alone wont cut it for long. Australia is lucky it has a lot of mineral resources but even with this it would be better off trying to add as much value to the exports and not just sell raw materials. If you run a trade deficit for long enough, your trading partners will eventually own you.

Promoting your own manufacturing is not a misallocation of resources per se. Many countries have successfully done just that and eventually they have become world class producers in the field. The benefits from manufacturing are enormous to a country and are worth the risk of it not working out IMO.

And no I am not a Nativist, which at least in the US means I support only native born Americans and not naturalized or legal immigrants. I am for everyone living in the US because I believe in the values this country once stood for. I also am rooting for the other democracies in the world such as Australia. Dictatorships like China and Russia don't get as much sympathy though I do care about their people. Sometimes the best thing for those countries is for their economies to fail so the people could take back their power. The West's help in building up China without demanding political change is already looking like a big mistake.

"If you run a trade deficit for long enough, your trading partners will eventually own you"

Explain the mechanism behind this?

Agree that manufacturing can work, but you have to be realistic about whether you can create a viable product at a competitive price. Shutting borders and imports and trying to recreate the wheel will result in a Soviet Union style economy where you're paying 150k for a Toyota Camry (wouldnt be this bad but still) and other countries also lose out in the revenue rewards of being the most productive. It's lose lose. What's your solution for this?

Where the USA dominates the world is innovation and services, which are harder to copy... why the fck would you reallocate resources from that into manufacturing a loss making product... rationally does not make sense

Also re china, would I take a 500% increase in per capita GDP over 20 years and massive poverty reduction over the ability to criticise the government on twitter? yes I would but this is a separate argument

Regarding your values.. makes sense

Regarding Australia/Canada's reliance on minerals.. yep that's an existential threat but it has almost nothing to do with our buyers and more to do with government fiscal policy in supporting sustainable industries. Not selling resource wealth is cutting off the nose to spite the face.. you're confusing symptoms with causes

Look at norways sovereign wealth fund.. bravo

 

[bdawg]

I am not sure why people think that a sudden influx of uneducated farm workers and peasants would by itself cause anything to change for the better.​

That's basically urbanisation, if you're denying the huge part urbanisation played in economic growth in the 20th-century, im not arguing any further

 

[Mato]

Like you suggested I did read Wikipedia and wasn't too surprised at what I found.​

I was thinking of the section labeled "causes"......because that probably is a better place to research the cause than a random snippet of the overview.

Causes

Causes


Regional GDP per capita changed very little for most of human history before the Industrial Revolution.
The causes of the Industrial Revolution were complicated and remain a topic for debate, with some historians believing the Revolution was an outgrowth of social and institutional changes brought by the end of feudalism in Britain after the English Civil War in the 17th century. The Enclosure movement and the British Agricultural Revolution made food production more efficient and less labour-intensive, forcing the surplus population who could no longer find employment in agriculture into cottage industry, for example weaving, and in the longer term into the cities and the newly developed factories. The colonial expansion of the 17th century with the accompanying development of international trade, creation of financial markets and accumulation of capital are also cited as factors, as is the scientific revolution of the 17th century. A change in marrying patterns to getting married later made people able to accumulate more human capital during their youth, thereby encouraging economic development.

Your quote harms your own argument, it doesn't help it. You highlighted a section detailing what "helped" the industrial revolution. Oxygen "helped" the industrial revolution as well. Was it the causitive factor? Let's not pretend neither of us understands the English language.

I think you're playing willful ignorance now to avoid the weakness of your own position. I'll leave this conversation via the high road. You are free to believe as you wish.

 

[Queequeg]

"If you run a trade deficit for long enough, your trading partners will eventually own you"
Explain the mechanism behind this?

All those 100s of billions of dollars that we send to China every year eventually has to come back to the US. Since they don’t want to buy enough of our manufactured goods they buy our treasury notes and our capital assets like real estate and companies. So if this goes on long enough the Chinese will own everything in the US and we will still owe them a lot of money.Its not sustainable in the long run.

"Agree that manufacturing can work, but you have to be realistic about whether you can create a viable product at a competitive price. Shutting borders and imports and trying to recreate the wheel will result in a Soviet Union style economy where you're paying 150k for a Toyota Camry (wouldnt be this bad but still) and other countries also lose out in the revenue rewards of being the most productive. It's lose lose. What's your solution for this?

This is exactly how Toyota came to dominate the car industry. Japan restricted imports of US cars, still does, and subsidized exports of Japanese cars. Eventually Toyota and the rest figured out how to make a good car though their early ones where terrible. The other Asian Tigers and China did the same in a variety of industries. None developed through free trade principles.

You avoid the Soviet problem by maintaining competition within your country and continue efforts to export until you get it right. So in Japan, Toyota competed with Honda and Nissan until they were ready for the world market. Yes Japanese consumers did lose in the short run by having to drive sh*tty cars but I am sure that they are very happy with that decision now.

Where the USA dominates the world is innovation and services, which are harder to copy... why the fck would you reallocate resources from that into manufacturing a loss making product... rationally does not make sense

It has to do with capturing as large a share of the value chain as possible. This is what leads to real wealth over time. Innovation jobs and knowledge worker jobs are very good for the economy because they create a lot of value. However there are only so many of those jobs to go around and only so many smart enough people to do them. It’s the other service sector jobs like fast food workers, call center staff, retail salespeople, amazon shippers that don’t create enough value to justify a salary that provides a very high quality of life. If enough people end up in these jobs then the country gets progressively poorer or at least becomes more and more unequal. Manufacturing jobs are especially valuable because they create a lot of value and provide for lots of high paying jobs for people who may not be on the far right of the IQ curve.

Also re china, would I take a 500% increase in per capita GDP over 20 years and massive poverty reduction over the ability to criticise the government on twitter? yes I would but this is a separate argument

I was speaking from the viewpoint of a citizen of one of China’s main adversaries whose country now has to deal with a more and more belligerent China e.g. the South China Sea. I am sure that Australia also would have preferred that China were to have liberalized its politics and gone the route of Taiwan or South Korea.

Regarding Australia/Canada's reliance on minerals.. yep that's an existential threat but it has almost nothing to do with our buyers and more to do with government fiscal policy in supporting sustainable industries. Not selling resource wealth is cutting off the nose to spite the face.. you're confusing symptoms with causes
Look at norways sovereign wealth fund.. bravo

You got me wrong, or maybe I'm not understanding you. I am not saying that Australia shouldn’t mine its resources but that your economy would do a lot better if it processed the resources further down the value chain before selling them. So instead of selling raw bauxite to China you could process it into aluminum ingots and sell those. Same with the other raw materials. China is smart and prefers to buy its raw materials in as unprocessed form as possible so it can create more of the value.

 

[Queequeg]

That's basically urbanisation, if you're denying the huge part urbanisation played in economic growth in the 20th-century, im not arguing any further

Yes urbanization was a big boon to the economy but there was more to it than just massing people together. A lot of other factors needed to be in place to put those people to work. This paper argues that the growth from 20th century urbanization was mainly due to the industrial revolution and that many times in history urbanization hasn’t led to greater growth.
The Problem of Urbanization Without Economic Growth

The key takeaway: We should stop assuming that urbanization and development are inextricably linked. As the researchers write, “Urbanization has occurred throughout history without necessarily being associated with manufacturing expansion or with rapid economic development, as during an industrial revolution.” Rather, it appears that urbanization is an innovation, not a mere consequence, of a more powerful economy.

“The idea of large cities and high urbanization rates has, like many other innovations, diffused slowly across countries and time,” the researchers write. The process of that diffusion looks like urbanization without growth, they find, and it’s been occurring for centuries. Indeed, the findings of the study suggest that the mid-20th-century connection between urbanization and growth may well be a historical anomaly, limited to the countries that developed more or less during the industrial revolution: the United States, Canada, Western Europe, and Japan.

 

[lvysaur]

So in Japan, Toyota competed with Honda and Nissan until they were ready for the world market. Yes Japanese consumers did lose in the short run by having to drive sh*tty cars but I am sure that they are very happy with that decision now.

There's a difference between protectionism from the get-go vs suddenly introduced, is there not? I can't imagine the average Japanese citizen had a great car to start with back then.

 

[Kyle M]

Well said, inflation figures adjusted for asset values would be different, however debt servicability is much higher now then it used to be due to low interest rates so does this counteract the increase in asset value unaffordability.

Yes it favours the incumbents but the overall boost to economic activity is contrary to what inflation would have you believe.. maybe inflation is good?

The housing industry in Australia/Canada has been one of the biggest generators of wealth for middle class consumers in perhaps the world over the last 20 years, and debt is now much cheaper than it used to be in the 70s and 80s meaning more of that wealth is pocketed, this has the downstream effect of increasing consumer sentiment and supporting economic activity further

What's your take on that

Those gains are all illusory, they are borrowed against the future recession that will be needed to reorganize capital allocation.

Interest rates aren't just *low* for now reason, they are low because central banks are printing currency and buying sovereign debt at above market prices, driving up the prices of bonds and subsequently driving down the interest rate of the coupons. This must be reversed eventually, or else all currencies taking part in it will fail as they cannot be printed for infinity, and when it is reversed all of the supposed "gains" that this pumping created will disappear in the largest market bloodbath ever seen.

If inflation was good for an economy, Venezuela, Zimbabwe, Weimar Germany etc. would have been doing very well. The time that the USA grew the most was the post-Civil War period until the Progressive Era when deflation was occurring, and then shortly after WWII there was a huge bump as well. A real deflator against current growth numbers (not the anemic and politically calculated CPI) would show no growth or even recession right now. The car market is about to turn over, sub prime loans have created a bubble there, and the student loan bubble can't go on forever either. Those two bubbles alone are enough to start the chain reaction that might take down the bond bubble, which is the grand daddy of them all.

But my main point is, things like housing prices going up are not a sign of a healthy economy. A healthy economy grows by increasing its capital stock, and thereby the productivity of its workers, and this puts downward pressure on prices by increasing supply. The only reason this isn't happening in housing is because it is an extremely regulated sector. Places like San Francisco, where real estate is insane, have laws that set aside huge tracts of land that can't be built on. Why? Because the politically connected people in San Francisco government have real estate, or friends with real estate, and they want their properties to be valued in the millions rather than the hundred thousands. That is what happens in every town and city with real estate, and on a national scale it limits supply to increase price. It's a cartel, just like the AMA for doctors or the taxi cab medallion for drivers (we can see that medallion, and rides in places like NYC, both crashing in price as Uber breaks that particular cartel). So real growth is when the economy itself is more productive, not when one asset class has a higher price than it did before. Think of it as trading goods and services, without money, how would you measure the health of an economy then? If there were MORE goods and services available, or LESS? If the amount of work you had to do to produce X in order to trade for Y was GREATER, or LESSER?

 

[Queequeg]

I was thinking of the section labeled "causes"......because that probably is a better place to research the cause than a random snippet of the overview.

Your quote harms your own argument, it doesn't help it. You highlighted a section detailing what "helped" the industrial revolution. Oxygen "helped" the industrial revolution as well. Was it the causitive factor? Let's not pretend neither of us understands the English language.

I think you're playing willful ignorance now to avoid the weakness of your own position. I'll leave this conversation via the high road. You are free to believe as you wish.

I would hate to see it when you think you are taking the low road.

Nothing in that one sentence out of the many many other factors given contradicts my statement that a cheap influx of labor was not the primary cause of the industrial revolution. I already said that it helped (to use your word) to have a surplus of labor to put to work in the factories but that doesn’t make it the primary cause. Many times throughout history, countries have had an excess amount of labor for whatever reason, but it never resulted in anything like the Industrial Revolution.

You too may want to read this. Wikipedia is not usually considered the be-all end-all of intelligent discussion. The Problem of Urbanization Without Economic Growth
https://www2.gwu.edu/~iiep/assets/docs/papers/Jedwab_IIEPWP_2014-1.pdf

Also your previous statement about the state of technological development in the world is fully contradicted by your Wikipedia scholars.

Again....every place on Earth had approximately the same technology at the same time, and China was much further along on some of the key technologies. The tech was necessary to the industrial revolution, but it wasn't the cause otherwise it would have started in Hangzhou in 1200. The cause was a massive unemployed work force in London ready to utilize said technology.

Industrial Revolution - Wikipedia

One question of active interest to historians is why the Industrial Revolution occurred in Europe and not in other parts of the world in the 18th century, particularly China, India, and the Middle East, or at other times like in Classical Antiquity[158] or the Middle Ages.[159] Numerous factors have been suggested, including education, technological changes[160] (see Scientific Revolution in Europe), "modern" government, "modern" work attitudes, ecology, and culture.[161] However, most historians contest the assertion that Europe and China were roughly equal because modern estimates of per capita income on Western Europe in the late 18th century are of roughly 1,500 dollars in purchasing power parity (and Britain had a per capita income of nearly 2,000 dollars[162]) whereas China, by comparison, had only 450 dollars.

 

[Kyle M]

What's with the lolling at the Mises Institute? Genuine question as I am interested in beginning to examine some of their work.

There has been a rift in libertarianism since the 70s between the Beltway libertarians and the Auburn libertarians. Take a look at their respective work and make your own decision. I can offer plenty of recommendations if you're interested.

Readers of Ray Peat and others may recognize a pattern of truth tellers making enemies that attack their character and dismiss them without giving a refutation of how and why any of their statements and arguments are incorrect.

 

[Kyle M]

I would hate to see it when you think you are taking the low road.

Its obvious to everyone on this thread, except for you, that you don't have any idea what you are talking about.

 

[Queequeg]

You get what you give.

It really seems like you have a simplistic view of how the world works, and are totally wedded to the narrative that more workers equals lower standard of living for extant workers.

There's no point in even discussing this because you are 100% wedded to your belief like a religion.

You have taken a superior tone on these issues with me before on the forum, and are obviously ignorant of any of the writings of the school of thought I follow. That is an annoying and insincere combination.

If you think Ricardo's Comparative Advantage, from 200+ years ago, is the best case for free trade that exists in economics today, that is all but confirmation of your lack of economic education.

 

[Kyle M]

You get what you give.

I certainly stand by my statements, I've never said anything like that everyone or most people on the forum agree with me though. I'm clear on the fact that most people on this forum have different political and economic views than me.

 

[Queequeg]

I certainly stand by my statements, I've never said anything like that everyone or most people on the forum agree with me though. I'm clear on the fact that most people on this forum have different political and economic views than me.

I never said anything like that either. Contrary to what you now claim, several times you have demonstrated a preference for personal attack in the face of a dissenting opinion. Recognizing that others may disagree with you is only half the issue.

 

[Kyle M]

I never said anything like that either. Contrary to what you now claim, several times you have demonstrated a preference for personal attack in the face of a dissenting opinion. Recognizing that others may disagree with you is only half the issue.

I'm pretty sure the personal attacks I've made have been retaliatory, in this and other threads. It's just interesting that you started getting personal with someone in the post above, and I've been in the thread with other people not getting personal, it's almost like there's something about you that pushes things that way...

 

[Queequeg]

I'm pretty sure the personal attacks I've made have been retaliatory, in this and other threads. It's just interesting that you started getting personal with someone in the post above, and I've been in the thread with other people not getting personal, it's almost like there's something about you that pushes things that way...

Sorry but your four or so personal attacks were not retaliatory but seemed to come out of some frustration with me not agreeing with you. I only responded in kind after my ignoring your first few insults didn't stop the attacks. I would suggest you look in the mirror at what it is about you that likes to resort to personal attacks as opposed to a civilized discussion. I have seen many of your exchanges on other threads exhibiting the same pattern of personal attack.

Or maybe you really are just overly sensitive. Here is your response to another poster in this thread who said absolutely nothing insulting to you but you seem to go out of your way to take it that way.

P.S - it's actually mildly insulting to assume that I don't care about people, as you do, because I have a different opinion on how people are best helped. Not that I'm an overly sensitive loser who gets upset at things like that on the internet, but you might want to consider why you thought that in the first place, that "economic theory doesn't care about individuals as you do." Is it not instead that you *only* care about the individuals you can easily perceive, and not the ones being equally affected by things that you don't perceive?